Broadcom had to wait seventy-eight weeks until its purchase of VMware for $69 billion was authorized. This unusual merger of a semiconductor manufacturer with a business software specialist was only unstuck after the meeting of Xi Jinping and Joe Biden in San Francisco. They had more important issues on the table, of course, but the blocking of this transaction was not a peripheral issue: China imperatively needs to import Broadcom chips so that its networks remain competitive – it does not have, at this time, its own alternative, although works on it – while, of Broadcom's total revenue, 30% comes from the Chinese market. The knot was political.
Beijing's blessing has conditions: first, that the merged company's products will be exempt from US sanctions and will continue to be exported without hindrance in China; the second, that VMware server software will be interoperable with the hardware of Broadcom's rivals, including Chinese brands. The agreement also provides that China will have the right to supervise that the two previous conditions are met and reserves a possible withdrawal of permission to operate in the country.
In this climate of suspicion, questions remain uncertain or unexplained. One is the unexpected, but predictable, departure of VMware's first two executives: CEO Raghu Raghuram is stepping aside and his second, Sumit Dhawan, has left to run a cybersecurity company. Others will follow that path as soon as they can, as the company restructures into four operating divisions, and spins off a fourth branch to later sell. In general, the new owner's policy will be to reduce the size of VMware, although it will move to its campus in Palo Alto (California).
The slow wait (according to the pact signed by the two parties, the operation had a deadline of November 26) had caused discontent in the ranks of VMware, which was confirmed when a first round of 1,800 layoffs was announced. Competitors have been trying to fish in those waters for months, while spreading warnings about the problems that await the acquired company's customers. The merger is believed to reduce the number of large direct clients to 500, and leave the rest, more than 20,000, under the management of third parties.
Hock Tan, CEO of Broadcom and adept at bold acquisitions, has made no effort to contradict this environment. He will have his ideas, of course, but he has not revealed the integration plans or the composition of the corporate leadership; It is even unknown whether he will maintain the brand of a company that has preserved it even during the time it was part of the empire of Michael Dell, until now the first shareholder of VMware.
Tan's purpose, as he himself has said, is for Broadcom to obtain 50% of its revenue from the software and, at the same time, a profitability that allows it to pay the 28,000 million dollars in which it has borrowed to complete the purchase. .
The recipe is known, at least in broad outline. Leverage the heritage of a neutral infrastructure that is capable of working with many cloud services – and not just the four or five best known – to finish building a multicloud environment that VMware has pursued for years. The goal is obvious: a kind of universal API (programming interface) that allows users to navigate different scenarios in the cloud. It sounds easy, but it's not: simplify the migration of applications between different public and private clouds.
